Vegetable prices spike, despite bumper harvest
Vegetable prices shoot as bumper harvest fails to reach end consumer due to lack of efficient supply mechanism coupled with artificial shortages triggered by hoarders
New Delhi: Two successive years of drought had spiked food inflation in India, with pulses and vegetables contributing largely to higher retail prices.
While production of pulses dipped by 14% between 2013-14 and 2015-16 leading to higher prices, the rise in vegetable prices comes as a surprise.
A bright spot in Indian farming was production of horticulture crops such as fruits and vegetables, which rose consistently over the past few years. Small farmers reaped a bumper harvest of 282.8 million tonnes in 2015-16, despite a crippling drought primarily due to better access to irrigation. Also, 2015-16 was the fourth straight year of horticulture production outstripping output of foodgrains.
Despite the higher production of vegetables, which rose from 162.9 million tonnes in 2013-14 to 166.5 million tonnes in 2015-16—the highest Indian farmers ever produced—vegetables prices rose by over 14% during June and July this year. Why did this happen?
The problem is that the bumper harvest is not reaching the end consumer due to lack of efficient supply mechanism, said Pawanexh Kohli, chief advisor at the National Centre for Cold Chain Development (NCCD), a think-tank under the agriculture ministry.
“Think of the problem this way ... we are capable of handling only 60% of the produce. The rest is going waste,” Kohli said.
The images of an inefficient supply chain are stark. A month ago, farmers in Maharashtra were forced to sell onions at Rs.1 per kg when consumers in Delhi were paying over Rs.25 per kg. Desperate farmers in Karnataka had to abandon their tomatoes by roadside earlier this year as wholesale prices tanked. There’s more. Last year potato farmers in Uttar Pradesh, the largest producer of the tuber, left the harvested crop to rot as prices crashed.
According to Kohli, the solution is to create more near-farm integrated pack houses and induct refrigerated vehicles to transport the produce to the consumer. “Instead, what we have been doing is constructing warehouses mindlessly without thinking that tomatoes cannot be stored and must reach the consumer within three weeks of harvest,” Kohli said.
NCCD’s research from 2015 shows glaring gaps in India’s cold chain network.
For instance, India has just 250 pack houses—for grading, sorting, pre-cooling and packaging the produce extending its shelf life—against a requirement of about 70,000.
At present, there are less than 10,000 reefer (refrigerated) vehicles, while the country requires more than 62,000.
“Our focus should be on creation of pack houses, refrigerated transport and ripening chambers instead of large cold storage and warehousing projects,” Kohli said, adding, “Creation of a cold chain with post harvest management infrastructure will empower farmers to spread their sales to new geographies.”
This will have multiple benefits: Bring better value to farmers and reduce food loss, besides lowering inflation. “Efficient post harvest management, while extending the marketable life of fresh produce, can have a transformational impact on how farmers access and interact with markets,” Kohli said.
Pravesh Sharma, a former top official with the agriculture ministry, who runs a start-up called Sabziwala that supplies fresh produce from farmers to consumers, agreed that the supply chain is inefficient and fragmented.
“Traders often play the market by creating artificial shortages. This could be as simple as stopping four trucks of onions outside Delhi can drive prices up,” Sharma said. “The government has failed to create a competition to these informal cartels who trade in cash without any traceability.”
Sharma added that India needs to recreate the Amul experience (with milk co-operatives) for fruits and vegetables. “So far cold storages have only benefitted potato traders. The government needs to incentivize aggregators and also reduce mandi (wholesale market) transaction charges that go as high as 12%.”